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E-retailer BeautyKind seeks to go public 18 months after launch

April 25, 2016 04:04 PM

An online cosmetics retailer that’s only been in business since November 2014 and out of beta mode for a year is selling shares to the public, aiming to raise $10 million.

BeautyKind, which came out of beta testing in March 2015, is selling up to 1.6 million shares in the company to the public online for a fixed price of $6.25 per share in a Regulation A+ Initial Public Offering. The process is being managed by investment firm WR Hambrecht and Co. and is a 12-month offering.

BeautyKind founder Hil Davis, who also co-founded menswear retailer J. Hilburn Inc. (No. 295 in the Internet Retailer 2016 Top 500 Guide), says the company generated $1 million in web sales in 2015 and is on pace for $5 million in sales this year. He says he wants to go public early to give his shoppers a chance to benefit from the retailer’s success.

“What I like about this is you end up turning your consumers into shareholders and I think there’s a lot of power there,” he says. “I thought it was a unique opportunity to create wealth for your individual investor as well as the consumer.”

The retailer has a banner prominently featured on its website located right below the product categories which links directly to its IPO page so that shoppers can buy stock themselves.

Part of what has driven BeautyKind’s early success has been its repeat buyers.

Davis says new customers spend an average of $68 on their first purchase. Repeat customers spend an average of $89 and come back on average more than three times per year. The company sells an assortment of high-end, brand-name cosmetics on its site, including Hugo Boss, Calvin Klein and Donna Karan. The retailer outsources its fulfillment to logistics provider Newgistics.

Davis has four priorities for the $10 million he hopes to raise. He intends to invest $2 million to upgrade BeautyKind’s technology. That includes development of a mobile app and plans to work with vendor ModiFace to incorporate a virtual try-on technology so shoppers can see how makeup will look on them before they purchase. Another $2 million is earmarked for social media and cable television advertising.

In addition, Davis anticipates hiring additional staff to augment BeautyKind’s four full-time employees and three contractors. The e-retailer also plans to test physical retail locations. Davis says BeautyKind has three stores located within Bloomingdale’s Outlet locations. Bloomingdale’s parent company, Macy’s Inc., is No. 6 in the Top 500.

“For us, where the world has changed is this whole concept of showrooms. That’s branding and marketing,” he says. “You have 30 to 50 showrooms across the country and they’re cash-neutral, but your brand presence is real and that elevates the brand. We don’t rely on the stores to be our bread and butter profit.”

Davis is counting on BeautyKind’s commitment to charity to separate it from already established competitors such as Sephora USA Inc. (No. 129), Ulta Beauty (No. 153) and Birchbox Inc. (No. 202). BeautyKind donates 5% of each purchase to the charitable cause of a shopper’s choice.

“You move the conversation from where you buy to why you buy,” Davis says. “(Charitable causes are) what we find is a very powerful emotional layer.”